Question
Given the following information, calculate the target cash balance using the Baumol model (4 Points). Annual interest rate -----------------------------------------------------------------------------12% Fixed order cost --------------------------------------------------------------------------------$100 Total cash
Given the following information, calculate the target cash balance using the Baumol model (4 Points).
Annual interest rate -----------------------------------------------------------------------------12%
Fixed order cost --------------------------------------------------------------------------------$100
Total cash needed -------------------------------------------------------------------------$240,000
Calculate the target cash balance?
Calculate the opportunity cost of holding cash?
Calculate the conversion cost, and the total cost?
What would be the opportunity, conversion and total cost if target cash balance $15,000 were held instead?
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